Virginia Mayo/AP Photo
Microsoft president Brad Smith addresses a media conference regarding Microsoft’s acquisition of Activision Blizzard and the future of gaming, February 21, 2023, in Brussels. On June 12, the Federal Trade Commission sued to block the deal.
You might think that something as simple as changes to a government form would not inspire much interest from journalists, or really anybody. But the Federal Trade Commission and the Justice Department’s modifications to the form companies fill out to give the government notice of proposed mergers are actually pretty profound, and show how the process of regulators can be as critical as the policy.
The premerger notification form is mandated under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Every merger above a certain dollar threshold, currently set at $111.4 million, must be disclosed to the antitrust agencies. But the form required only a modicum of information from the companies, thereby forcing the agencies to collect more data to determine whether or not to challenge the merger.
Per the proposed changes to the form, which will have to go through a public comment process, companies will have to offer a rationale for why they are merging. They will have to disclose what investment vehicles will be used in the transaction, including private equity investments. They will have to explain what products and business lines the two companies share in common, and what other business relationships, like suppliers, would be consolidated in a merger. They will have to hand over internal documents that project the merged firm’s market conditions and potential revenue streams. They will have to give an analysis of the relevant labor market, and a rundown of research and development activity. The acquiring company will have to disclose previous acquisitions. And per congressional mandate, they will have to provide information on subsidies received from certain foreign entities.
These are all pieces of data that the antitrust agencies previously had to collect themselves, but which the companies already had in their hands. By requiring that data to be provided in the premerger form, the antitrust agencies can spend less time running down basic facts and unwinding a complex deal, and more time analyzing whether or not it’s legal.
The agencies only have roughly 30 days in the initial waiting period after the form is submitted to decide whether a merger merits a deeper investigation. This new form would massively shrink the amount of time the agencies spend on data collection before making that determination. It also would put the companies on the record about their merger in a way that may prove so damning that they won’t even bother. This is the kind of information that companies don’t like to disclose on a voluntary basis.
This is the first review of the merger notification form in 45 years. In 1976, Congress estimated that Hart-Scott-Rodino would force advance notice for roughly 150 mergers a year; today, there are typically more than 150 mergers over the HSR threshold each month. “This proposal is designed to ensure that we can efficiently and effectively discharge our statutory obligations and faithfully execute on the mandate that Congress has given us,” said FTC chair Lina Khan in a statement joined by the other two Democratic commissioners.
Little things like this are not the stuff of headlines. Making government more able simply through getting the information needed to make decisions isn’t usually promoted on a campaign bumper sticker. But you can’t make policy on what you can’t measure. This is a quiet revolution for the antitrust agencies that will help them do their job better.
